Volvo Announces It Will Stop Funding Polestar, And One Party Seems Thrilled About That

Volvo reimagined its performance arm into an offshoot EV brand with its Chinese parent company, Geely

(Images: Polestar)

Major changes are in motion for Polestar, which has been tied at the hip with Volvo since its founding in 2017.

On Thursday, Volvo Cars said it would stop bankrolling Polestar Automotive Holding, in a move likely to change its trajectory as it jockeys for better position in a crowded EV market still dominated by Tesla, among virtually every other automaker these days.

It’s a significant move, since Volvo founded Polestar in its current form with Chinese parent Geely Holding. Since going public in 2022, Polestar’s shares have dropped a staggering 83%, according to a Reuters report. Citing “challenging market conditions”, Polestar announced last week it would cut around 450 jobs globally (about 15% of its total workforce) as it works to cut expenses and achieve a break-even cash flow point by 2025.

As part of the decision, Volvo Cars floated the possibility of handing its shares in Polestar over to Geely, as the Chinese firm said it would “continue to provide full operational and financial support to the independent exclusive brand going forward.” In a separate statement to Volvo’s, Geely said it welcomed the opportunity as Volvo shifted resources toward its own product development.

As of this moment, Volvo owns just over 48% of shares in Polestar Automotive.

Volvo’s shareholders are evidently thrilled by this development, as the Swedish automaker’s share prices soared up to 32% when the markets opened Thursday. Since then, things have slightly cooled down, to the point where shares are up around 20%.

As analysts are sounding the alarm about slowing EV sales, Polestar’s relatively slow product rollout calls into question exactly where the company will go from here. In its own release, Polestar did say it “reduced its expected external funding need to approximately $1.3 billion (partially by way of the aforementioned layoffs) until targeted cash flow break-even in 2025.”

It is also working on actually securing that external funding as Volvo pulls the financial plug, but losing that lifeline in the short-term could well impact upcoming launches, including the already-delayed Polestar 3, the Polestar 4 which is expected to reach the U.S. later this year, the Polestar 5 sedan and Polestar 6 roadster.